KUALA LUMPUR (Oct 7): The Ministry of Finance (MOF) has said investors are expected to remain cautious following the US Federal Reserve's (Fed) indication of further interest rate hikes to curb high inflation.

In the MOF's Economic Outlook 2023 report, the MOF said the Fed's hawkish stance could undermine the local equity market's performance.

"Nonetheless, this could be partly offset by continued inflows of foreign funds into Malaysia' equity market coupled with initiatives under Budget 2023.

"Going forward, the continuous development of the local equity market will provide wider opportunities for alternative savings and investment instruments to the retail segment, encouraging greater public participation in the equity market," the MOF said.

The MOF said the domestic capital market remains robust with the equity market recording net foreign inflows amounting to RM8.2 billion and local retail investors' purchase of shares worth RM1.8 billion between January and August.

According to the MOF, foreign holdings based on the combined market capitalisation of companies listed on Bursa Malaysia stood at 20.1% as of end-August.

The MOF said the combined market capitalisation of companies listed on Bursa stood at RM1.71 trillion as of end-August 2022 compared with RM1.83 trillion in 2021.

Fundraising across the Malaysian bond and equity markets was modest, according to the MOF.

Between January and July, gross funds raised across the Malaysian bond and equity markets grew 1.4% to RM165.2 billion from a year earlier, helped mainly by the public sector's gross fundraising expansion of 5.7% to RM102.9 billion.

"In contrast, gross funds raised by the private sector declined by 5% to RM62.3 billion within the same period," the MOF said.

Read more stories from the Economic Report 2022/2023 here.